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You are the manager of a small farm. Your yearly revenue is $300,000. You work in your farm. You could work somewhere else for $50,000 a year. However, if you work elsewhere the lack of supervision hurts performance and farm revenues will decrease by $20,000 as a result. You pay other workers $140,000 a year. The land is yours, and could be rented for a different purpose or to a different farmer for $50,000 a year. Every year, you get a farming license for $50,000. You buy it January 1st and it is good for one whole year. The yearly cost of seed, water and fertilizer is $40,000. It is now March.